If people are our greatest asset, why don't they appear on the balance sheet?

Saturday, February 9, 2013

Coaching before hiring: Charity or Being Smart?

A friend of mine has recently gone through the interview process with a well-known management consulting company. My friend is a senior executive in the finance industry and, obviously, a desirable candidate for any large consultancy. To cut the long story short, after rounds of phone and face-to-face interviews with HR, experts and partners, the resolution was that a bit of coaching is needed before a firm offer could be made. Guess what: the consultancy offered an executive coach.

This does not sound like a standard practice to me, but hey - I have never worked for a consultancy before. In my experience, if you like the candidate but there is one or more aspects for improvement, you would hire that person and put together a personalised development plan with internal or external resources. Pre-employment coaching that you invest in yourself - yes. Pre-employment testing - yes. Even pre-employment background checks - regular and known practices. Why would anyone invest in you before hiring?

Surely, looking at it from the perspective of a large business, the case for such practice can be quite strong. Several sources quote quite different figures for the cost of a bad hire (e.g. Investopedia: 1-3 monthly salaries) but that´s for a regular employee. For an executive, I would at least double that, and some experts claim that replacing an executive would cost a company 3-5 yearly salaries. Try this useful tool to make your own calculations:

So, let´s imagine that my friend makes $300 K a year. Costs of replacing an executive (severance package, benefits, new search, loss of productivity, loss of clients, reputations, etc.) - we are talking about figures of $500 K and up. So, when we look at figures of this magnitude, what would investing in 5 sessions with a coach charging $1000 an hour mean? Even 10 2-hour sessions will only bring us to $20K, and I am talking about a good coach, so this estimation is on the high end. The payoff could be tremendous. Apart from boosting the company´s image, if everything goes right and the offer is made, they are getting an executive who is technically sound and who has already been coached in line with the company´s directions. That coach can also provide important information to HR in the form of a coaching report, giving direction of future development. If it does not work, well... The risk of doing it wrong far outweighs the investment.

My initial surprise at this seeming charity turned into appreciation for long-term thinking. They are a top-notch management consultancy after all :)